Summary
Reducing Scope 3 emissions pays off in five ways: lower costs from using less energy and material, lower risk from carbon prices and supply shocks, stronger relationships with customers who need low-carbon suppliers, easier access to capital, and readiness for disclosure rules. Because Scope 3 is usually most of a company's footprint, it is also where the biggest reductions are.
Last updated: 23 October 2026
Why focus on Scope 3 rather than Scope 1 and 2?
Because that is where most emissions, and most of the opportunity, sit. In companies' 2023 disclosures, supply chain emissions averaged 26 times operational emissions, according to CDP and BCG (June 2024). For retailers the ratio was 92 times.
Scope 1 covers direct emissions such as fuel burned on site. Scope 2 covers purchased energy. Scope 3 covers everything else in the value chain, from farming the raw materials you buy to customers disposing of your products. For a full explanation, see our main guide to Scope 3 emissions.
What are the business benefits of reducing Scope 3?
There are five main benefits. The table sums up each and the evidence to look for in your own business.
| Benefit | How it works | What to measure |
| Lower costs | Less energy, material, packaging and waste in the value chain | Cost per unit, material use, logistics spend |
| Lower risk | Less exposure to carbon prices, input price swings and supply disruption | Emissions-intensive inputs and suppliers; carbon cost exposure |
| Customer demand | Large buyers set supplier targets and ask for product footprints | Share of revenue from customers with supplier climate requirements |
| Access to capital | Lenders and investors use Scope 3 data for transition risk and sustainability-linked finance | Financing terms; investor questions answered |
| Disclosure readiness | Scope 3 is required under IFRS S2, AASB S2 and California SB 253 after transition periods | Reporting deadlines; assurance readiness |
Does decarbonisation actually save money?
For many companies, yes. In BCG and CO2 AI's 2024 survey of 1,864 executives, cost savings were among the main sources of value companies reported from decarbonisation, from efficiency, waste reduction, rationalising materials and renewable energy. BCG reported that many climate leaders saw net benefits worth more than 7% of revenue (BCG, September 2024).
In Scope 3, savings often come from redesigning packaging, cutting food and material waste, improving logistics routes and loads, and working with suppliers on energy and fertiliser use.
How does Scope 3 reduce risk?
Scope 3 data shows which inputs and suppliers are most carbon-intensive, which are usually the ones most exposed to carbon prices, new regulation and climate impacts. The CDP and BCG 2024 report also estimated a large potential carbon cost linked to upstream emissions in manufacturing, retail and materials. Knowing your exposure lets you diversify suppliers, change materials or support suppliers before costs hit.
Why do customers care about your Scope 3?
Because your emissions are part of their Scope 3. Large retailers and brands with science-based targets need their suppliers to cut emissions too. Suppliers that can share credible product and company data, and show reductions, are better placed in tenders.
Does it help with investors and lenders?
Yes. Investors use emissions data to judge transition risk, and lenders offer sustainability-linked loans tied to emissions targets. A complete, documented Scope 3 inventory makes these conversations easier.
What does this look like for a real company?
Princes, the food and drink group, worked with Terrascope to prepare its procurement team for a lower-carbon value chain. Mapping its value chain showed that its top five activities made up more than 60% of its emissions, which told the team where supplier work would pay off most. Read the Princes case study.
What gets in the way, and how do companies overcome it?
The main barriers are poor data, suppliers that aren't ready, and teams that don't see the link to their own goals. We cover the data side in detail in Scope 3 measurement challenges. Three approaches help:
- Work with suppliers. Set clear expectations, share tools and agree joint reduction projects. See Scope 3 supplier engagement.
- Invest in data and tools. Replace spreadsheets with a system that collects supplier data, matches emission factors and shows hotspots.
- Engage internal teams. Give procurement, product and finance teams the emissions data relevant to their decisions, and tie it to their targets.
Focus reductions in the right order. Our post on the mitigation hierarchy explains why avoiding and reducing emissions comes before compensating for them.
How Terrascope helps build the business case
Terrascope helps you find where Scope 3 reductions save money and lower risk:
- Hotspots: breaks emissions down by country, business unit, site, product, material and supplier, so you can see where to act first.
- Data quality: highlights gaps in data quality and coverage, so you know which figures are solid enough for decisions.
- Supplier collaboration: gives suppliers a guided workflow to submit the right data in the right format through Scope 3 supplier engagement.
- Reduction planning: models the effect of reduction levers on your footprint with Decarbonise with AI.
- Team dashboards: shows each team the emissions data relevant to its work.
In an IDC brief commissioned by Terrascope, 29% of organisations surveyed said supporting sustainability outcomes could help them reduce waste and optimise costs. Read the IDC analyst brief.
Not sure where your largest Scope 3 categories are? Start with a free value chain mapping workshop.
Frequently asked questions
What is the business case for reducing Scope 3 emissions?
Lower costs from using less energy and material, lower exposure to carbon prices and supply shocks, stronger customer relationships, better access to capital and readiness for disclosure rules. Scope 3 is usually most of a footprint, so it holds the largest reduction opportunity.
Does reducing emissions save money?
Often. In a 2024 BCG and CO2 AI survey, cost savings from efficiency, waste reduction and materials were among the main sources of value companies reported from decarbonisation. Savings depend on your sector and the levers you use.
Why do customers ask suppliers for Scope 3 data?
Because a supplier's emissions are part of the customer's Scope 3. Companies with science-based targets need suppliers to measure and reduce emissions to meet their own goals.
Is Scope 3 reporting mandatory?
In more places each year. IFRS S2, Australia's AASB S2 and California's SB 253 require Scope 3 after transition periods. The EU CSRD asks for it where material. The US SEC rule does not.
Where should a company start reducing Scope 3?
Screen all 15 categories, find the few categories, materials and suppliers that make up most emissions, and focus there. Look for levers that also cut cost, such as packaging, waste and logistics.
Work out the return for your business
Use the Terrascope ROI calculator to estimate the time and cost savings of managing Scope 3 on a platform.
